Developers Need Twitter, But How Much Does Twitter Need Them?

The importance of the relationship between Twitter Inc. and its third-party developers was made clear by the 1,000 or so people who came to the company’s much-anticipated first developer conference.

Hovering over the affair, held Wednesday at San Francisco’s Palace of Fine Arts, was a question that developers increasingly have been asking in recent days – where do we go from here?

Twitter rolled out several new features at the conference, including improved data connections for developers and a new advertising service for which it plans to split revenue evenly with developers. The moves are not only part of the growth of the company in becoming a mature business – which now has 175 employees, 105 million registered users and 180 million monthly unique visitors to its Web site. They’re also designed to help the third-party developers who are a major part of the company’s strategy, as 75% of the traffic for Twitter comes from outside Twitter.com, through third party companies.

The conference comes amid a delicate time in the Twitter-developer relationship. After Twitter this week announced its acquisition of Atebits, owner of iPhone client Tweetie, and the launch of its Twitter Blackberry application, developers who make apps to access tweets have voiced concerns about the impact of Twitter’s moves.

But Evan Williams, chief executive, explained the decisions by saying the company was trying to increase the number of users of Twitter. By creating a Twitter mobile app, which did not exist before, users would more easily find and join Twitter, which will ultimately result in more users for developers, Williams said. He showed a video of a user having a hard time trying to find a Twitter app on the iPhone to illustrate the need.

“I know this was a controversial decision to many people because there were other Twitter apps on this platform,” Williams said during his keynote speech. “There are fantastic companies and we love the innovation happening there. But when we did the research we found we were really under-serving our users. We had to have a core experience on major (mobile) platforms just like we have to have one on the Web.”

Venture investors said there are still opportunities to invest in Twitter developers. But they acknowledge the inherent tension within the Twitter ecosystem.

“It’s like the PC,” said David Pakman, partner at Venrock, in a panel discussion at the conference. “When I was at Apple we were always debating should we bundle (the Mac) with a disk defrag or anti-virus? But would that put developers out of business?”

Mike Hirschland, general partner at Polaris Venture Partners and another conference panelist, said there is still a threat for developers.

“Absolutely, I’m not buying all the feel-good, love not war,” Hirschland said. “The tension is inherent in the idea of technology platforms. At the point (Twitter) decides to be a serious business, if you want to be a player in the platform ecosystem, you’ve got to go in with your eyes open.”

Unlike Facebook, which developed initially as more of an application and later launched a third party platform, Twitter was from the start a platform with an application programming interface for developers, said Peter Fenton, general partner at Benchmark Capital and a Twitter board member.

“One of the things that’s different with Twitter from Facebook is that Facebook has historically owned the customer, and owned the notion of the social graph. It’s an application. Twitter is the opposite. It’s inherently open. From day one it had an API.”

Asked about third party developer opportunities in this space, Fenton said that for enterprise-oriented companies, to help companies connect with audiences is “very fertile,” and for consumers there is much opportunity in the local, coupons, geo-location space, akin to Groupon Inc.

At the conference Wednesday, Twitter also provided a roadmap for some of its upcoming features, which was meant to ease concerns by providing more information for developers so they know what to build.

Still, Williams said in an answer to a question from the audience that Twitter would not rule out eventually hosting photos, videos or other media in order to improve user experience. There are a number of third party companies that provide photos, videos and other media through Twitter.

Two venture-backed start-ups illustrate the position that developers are in as they build their businesses on Twitter while also making sure to differentiate from what Twitter does.

One company, LiveIntent Inc., which has raised $4.25 million from Benchmark Capital Battery Ventures and First Round Capital, provides a service to Web publishers so that people who go to a Web site can quickly click a button to follow all of the Twitter accounts or writers associated with that Web site.

This part of LiveIntent’s service may appear similar to one that Twitter just announced, called @anywhere, which enables publishers to place links on their sites so that people can click a button to follow a writer on the site.

But Matthew Keiser, chief executive of LiveIntent, points out differences. First, LiveIntent also provides targeting to give people the ability to also click to follow other related Twitter users that write about similar things as the page the person is on. LiveIntent also provides advertiser-sponsored Twitter accounts that are related that people can follow.

In addition, LiveIntent intends to place not just Twitter accounts in its suggestion box to users, but also other social media sites such as YouTube, Facebook and the like.

This diversification beyond just Twitter is one strategy that many developers have taken to ensure that they are not dependent on one company.

Another company, OneRiot Inc., also works in the same area as a new product that Twitter just announced. Twitter’s Sponsored Tweets product enables companies to place their tweets in user search results, while OneRiot provides display ads for companies like Coca Cola next to its real-time content search results.

Twitter’s Sponsored Tweets and OneRiot’s ads will be two types of ads with different formats, said Tobias Peggs, president at OneRiot.

“[Twitter’s] will be like Google Search results… We’re more like display banner ads,” Peggs said.

And like LiveIntent, OneRiot also pulls content from other services, such as MySpace and Digg.

The company has raised $27 million from Appian Ventures, Commonwealth Capital Ventures and Spark Capital, according to VentureWire archives.

Ultimately, developers at the conference were seeking to become the next company to succeed on Twitter’s platform. While there have been some companies, such as CoTweet Inc., that have been acquired, there has not been a large breakout company like Zynga Inc. from Facebook.

“Twitter has not really been known for monetization,” said Jay Zaveri, an entrepreneur at the conference who is between companies. “Facebook had a big boost (from social games). What is that secret sauce (for Twitter)? It’s still a white space. If someone could come up with that it would be really interesting.”

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